Competitive strength must be maintained

From his modest, functional office in Sandyford, Barry Kenny doesn't claim he can see around corners. But with the Irish economy in better shape than ever, and the business community striding confidently forward, he is optimistic. With some provisos.

"We are at a unique time. You have a number of things coming together; a very buoyant economy with growth rates that are not sustainable in the long term," he says.

There is a well-accepted checklist of things Ireland got right a decade ago to create today's healthy economy, he adds. The trick is to figure out now what will be the crucial elements of continued success in 10 years time. This will be addressed at the IMI's national management conference "Sustaining Success in a changing world," being held in Killarney this weekend.

Already, there is much to be happy about. "There is peace in Northern Ireland I don't think people have quite realised that this will bring enormous opportunity. The Troubles have been a ball and chain around the ankles of the economies in the North and the South. And that will bring a further flowering, if we can get it to hold."

The fact that the Republic will be a founder member of European economic and monetary union will not only bring about an era of sustained low interest rates, but will also bring about a new way of doing business.

"When you think about it, we will become almost the equivalent of a state within the US. Anyone in Ireland will be perfectly free to do business anywhere in Europe in a transparent currency," he says. "And if you stick the Internet on top of that electronic business and think in terms of modern delivery systems, there's no reason why you couldn't buy anything from anywhere in Europe, or sell things from Ireland to anywhere in Europe with next-day delivery and completely transparent pricing."

While language barriers can be overcome, Ireland's adoption of the "Anglo-Saxon" system of company financing, using individual shareholders or IPOs, contrasts with the system favoured on the continent. There, typically, there are significant bank holdings in companies, and cross holding by other companies, he says. But there is a global swing towards private investment, and such a trend favours Ireland.

But another trend noted by the IMI does not favour Ireland; productivity.

"We've taken a look at this we analysed productivity between 1991 and 1996 and it's fairly clear that the high-technology sector has been the key driver."

While there are Irish technology firms making gains in productivity, the dominance of multinational corporations in the sector means that the bulk of the Irish economy's increased productivity stems from foreign companies.

The study shows productivity gains in agriculture, at the expense of jobs, but points up a decline in productivity in the public service and the defence forces.

"We would argue that the route ahead within the public service is to get away from the hierarchical system of organisation very few modern companies work with hierarchies now, that's in the boneyard and look for flat structures, decentralised, with decision making in the front line. That's very easy to say but very difficult to do in the public service at the moment."

Social partnership has worked well for Ireland, but each of the partners must now refocus on the future, and play their role in maintaining Ireland's current success.

First, he says, organisations have to stay competitive in a global market, not just in terms of cost but also in product development and market access.

"I think the multinational sector has particular things they want," he adds. "In some ways the current success is driven by the availability of highly skilled people we produced in the early 1990s. The multinationals need continued access to young, educated, skilled people at reasonable cost. And I stress the `reasonable cost' aspect, because there is some evidence of inflation creeping in."

He says some large international companies with operations here are also worried about the impact of European Union social legislation on Ireland, and its cost to them.

He says they are also worried that the Government might introduce legislation which would force these companies to recognise their workers' constitutional right to be in a trade union.

At the same time, he says, one should not be anti-union.

"My own perspective would be that the unions to an extent have to re-invent themselves. Because if you move away from adversarial relations and I think we've broadly got away from that

the challenge for them is to redefine their role in the context of a situation where the interests of an organisation and its employees are almost identical."

He is unsympathetic to the argument that workers' pay restraint for the past decade has generated great wealth, but this has not been shared. In a one-currency Europe, pay increases will feed directly into inflation, which will undermine competitiveness.

He has even less sympathy for tax dodgers.

"I believe that part of becoming a mature economy and a mature society is that we do have effective regulation and legislation, and that we apply it," he says.

"I wouldn't have a problem about investing a little in a more just society. I think the key area in that is education, and that's where I would put the investment," he adds. "But I would not support a view based on envy of people who are doing well."

The Government also has a role to play in helping the economic recovery of Northern Ireland, he says. It will take five or 10 years to get the North up to scratch, but business should be mindful of the opportunities, and the economies of scale, of an all-Ireland economy.

The IMI, which recently opened a Belfast office, will play its part in management training. And in general terms, he says, the organisation has a lot of work ahead.

"If you look at the economies of most Western countries since the war, there's been a lot of growth, but the characteristic of these economies is that the mass of output is declining," he says. "If you took a billion pounds' worth of output today and weighed it, it would weigh about half of what it used to."

This is because there has been a fundamental shift, with growth happening mainly in the services sector and in the area of high-technology, while the old industries centred on steel and heavy manufacturing are moving to developing countries.

"The characteristic of the new industries is that they are very knowledge-intensive. Once you accept that, a key question is how to manage the knowledge in industry," he says. "Knowledge is also very much tied up with people so leadership and knowledge management are increasingly important."